Housing Crisis OR Government Greed?

International rating agencies have just downgraded our major banks sighting housing affordability. These actions could result in our banks paying a higher rate for future loans and in turn passing this onto borrowers.

This is good! We already own properties and such a move by the banks would be inflationary as is their current greedy grab with several interest rate rises so far this year, all under the sleepy days of our Liberal Treasurer.

We as landlords collectively see this extra expense as the cost that has to be reclaimed back from higher rents. Inflationary.

Are these international rating agencies right? According to Knight Frank, Sydney prices per square meter are between $20-30,000 versus a much higher $60,000 in London and $40,000 in New York.

Last week we showed you the latest figures internationally and in fact, the majority of major cities are well below the top fifty across the world. What housing crisis?

In delving into the figures we see that our prices are low versus international comparisons, and this is despite Government greed! Yes, 40% of our new supply is taxation! Look at this chart and see the cost to income ratio prior to the introduction of GST. That is the left-hand side of the scale and there you can see that on average across all the capital cities the housing price to income was 3.5%.

Now Sydney and Melbourne are over 5% and the other capitals are 4%. The Government has imposed a 10% tax on new housing and the State Government has piled in with increased to Stamp Duty of approximately 5%. So back then this 15% impost on say $250,000 was $37,000. Now with higher prices, say averaging $500,000 across most States, that has jumped to $75,000. What housing crisis? What affordability crisis? It's simply Government greed!

On $1,000,000 Sydney property it’s a whopping $400,000 in government greed. To this we have to add the rampaging taxes from Councils, State Governments and Federal Governments from PAYG to levy's fees and charges and land tax. Compared to seven years ago GST has risen 17% but taxes on property have risen a massive 42%. What affordability crisis? It's a Government greed crisis.

Next look at the house to income ratio. The figure shows NSW are suffering but the figures are incorrect. The NSW economy was the best economic performer in 2016 with a huge 40% of national GDP. The wage used in Sydney should not be based on the national average or even the NSW State average. It should be based on two times the Sydney average wage. What affordability crisis?

Be a winner, not a loser.

Out of all of these man made crisis, history shows there are winners and losers. The losers here will panic and sell or simply sit on their hands and do nothing. The winners will see this as an opportunity as there are less and less bananas coming into the store.

Kevin Young // Property Club Founder